Stocks seen to move sideways this week

MANILA, Philippines - Local stocks may churn sideways this week as investors remain cautious amid a slowing US economy and the downgrade by rating agency Fitch of five eurozone countries.

Fitch recently cut credit ratings on Italy, Spain, Belgium, Slovenia and Cyprus, and lowered its outlook on Ireland, saying the “near-term economic outlook highlights the greater vulnerability to monetary as well as financing shocks faced by these sovereign governments.”

Last week, the benchmark Philippine Stock Exchange index (PSEi) plunged 1.43 percent to 4,680. The property sector led the decline with 1.86 percent, followed by services (1.74 percent), holdings (1.42 percent) and financials (0.95 percent).

However, the mining and industrial sectors outperformed the market, gaining 1.35 percent and 0.87 percent, respectively.

“After having generally tracked the path we had anticipated last week, the market welcomes week five with caution following a poor end to US equities and Fitch Rating’s two-step downgrade of Italian and Spanish debt,” said Accord Capital Equities Inc.’s Jun Calaycay.

“The lower ratings may squeeze credit market access for the troubled economies, adding to fears of a contagion as Greece struggles to negotiate terms of its restructuring ahead of a March 20 redemption,” he pointed out.

Meanwhile, the latest economic data from the US showed that the world’s biggest economy grew more slowly than expected in the last quarter of 2011, fuelling concerns about growth this year.

AB Capital Securities’ Gregg Ilag said the main benchmark index at its current level of 16.44 times is now quite expensive.

“From a technical standpoint, the index could fall to 4,542.11 which is a 38.2 percent retracement from the high. Momentum indicators also look a bit bearish in the near term, “ Ilag said.

“We advise investors to be very careful in buying index stocks at these levels, it is best to wait for lower index levels before buying certain stocks,” he added.

Calaycay pegged the market’s support at 4,650-4,670.

Ilag said the GDP results, as well as the outcome of the world economic forum, would keep investors at bay.

“Central bankers, business leaders and other influential people will be there, the different comments of these people will set the market tone for (this) week,” Ilag said.